The Newcastle nappy business gone global

Accidents happen, which is how the itti bitti nappy co started and how it became a global business. When founder Sue McLachlan had her daughter in 2005, she had a twofold problem: the expense of buying disposable nappies and the heft of existing cloth versions. Putting into practice the skills she acquired as an aspiring fashion designer, she designed and sewed a slim-fit cloth nappy to fit her tiny baby daughter, taking design cues from underwear and swimwear over bulky disposable nappies.

That’s where it might have ended, had McLachlan kept it to herself. “I started it as a hobby, making a few things for a few people so I could fund my own buying of fabric. I never intended it to be a business,” she says.

McLachlan received so many requests she found it simpler to put up a website to inform people when she had made some, and to make it easier for them to buy from her. Within three months, everything she made sold out immediately. “Within 10 seconds of listing it on the website,” she recalls. “Every time I’d make more they’d sell out straight away. That went on for maybe six months.”

First steps

McLachlan started outsourcing parts of the work, such as fabric cutting, and enlisted a friend’s mother to help her sew. “From there I thought of what would happen if I made it fully outsourced. I got a small loan off a family member to buy fabric and then recruited a couple of sewers and went from selling 10-to-20 nappies a week to selling 100 in a week—and even those would still sell out.”

At that point McLachlan was confident the small nappies could sell in a big way, so she sold her house to invest in the business, starting with finding a manufacturer. “Unfortunately the production in Australia wasn’t cost viable. There was no one place that could provide a finished product, it was all piecework.” Instead, she headed to China with a shortlist of factories. “I was really conscious of not going to a sweatshop so I visited China to make a decision, be confident.”

McLachlan still does all the design work, and even has an Australian artist do the prints for some of her limited edition ranges. She visits China five times a year to ensure her quality standards are met. “They’ve learnt to love my quality standards,” she laughs. “With a lot of things that come out of China they don’t understand why it needs to be good quality, but I spent time explaining it. It’s a little factory so we have a good relationship because we’re their biggest customer.”

After a bit of back-and-forth to satisfy McLachlan’s standards, the first commercially produced itti bitti nappy became available for sale in January 2008. “I relaunched and rebranded the new ones that came in so they were different to the ones I’d already been making,” she says. “I took a punt on what I was doing and it paid off.”

Growing pains

At the same time McLachlan received her first commercial shipment of itti bitti nappies in Australia, her UK-based sister received a similar shipment. McLachlan managed all the stockists and orders from the NSW regional city of Newcastle, and her sister shipped them from her garage in the UK to reduce postage costs. “We had a few stockists by then, people who’d imported them from Australia, which meant that they were really expensive in the UK. The shipping alone was huge,” says McLachlan.

Being able to ship direct from the factory in China to the UK opened up the business in Europe, where demand grew quickly. With no business experience, however, McLachlan found herself in the deep end trying to design new nappies, manage the business and make sure supply met demand worldwide.

McLachlan’s first trade exhibition, a baby show in Germany, exposed how unprepared she was. “I had a stockist in the UK who said ‘you should do such-and-such a show, it would be really good’. So I made a snap decision to go to Germany and do a trade show having never done anything like that in my life. When I first arrived and saw our tiny little stand—we were among these massive companies—I thought, ‘what was I thinking?’ I almost got a bit teary. But then I thought ‘I’m here, I have to do it’ and from that very first trade show we got some amazing contacts and it took the business to places we never could’ve gone.”

The lessons learnt from that experience have since benefited the business, as well as made her role as managing director easier. After the expo she took on a dedicated sales manager to handle the wholesale international business market. “I’d been dealing with individual baby stores, but in those shows you get a lot of business buyers and potential distributors,” she notes. “My expertise is in the product side and the creative side of things, not necessarily sales and I recognised that. So I had a sales manager handle those negotiations and deal with those customers.”

In Germany she also met an Austrade representative for the first time. Until that point she had taken opportunities ad hoc, but soon came to value the trade commission’s help with export advice and country knowledge to ensure itti bitti grew more strategically.

There are no regrets, however, in taking a leap of faith, she says. “At the time I just had to make decision on what I knew, which wasn’t a lot, and run with it. I’ve made some pretty bold decisions that may not necessarily have been the wisest having not come from a business background.”

But, she adds: “Don’t be afraid to take some chances and do something. If I’d sat down and thought about going into that first international expo, I don’t think I would’ve done it. So don’t be afraid to do things that take you out of your comfort zone. What’s the worst thing that can happen? You go in and it doesn’t work, but you learn a whole lot and then you might do it again later and do it 100 times better.”

The key is to learn from mistakes, McLachlan advises. “I guess we’re lucky that we made mistakes when we were small, when we could recover from them. If you make mistakes when you’re getting bigger, it’s much harder to come back from that.”

Toddler taming

The ‘toddler’ years of the itti bitti nappy co were a bit more organised. Its sales team now proactively pursues business. “In the beginning it was stockists contacting us, people who had heard of us. For a while we couldn’t even take wholesale because we didn’t have enough stock. Once we got past that issue, it has been our sales team looking after all the customers we have and seeking out new ones,” McLachlan explains.

In the meantime, she has designed different styles of nappies in different colours and prints as well as added a range of nappy accessories: changing mats, blankets, breast pads, wipes, wetbags and even special washing powders for cleaning nappies.

And having outgrown her sister’s UK garage, McLachlan now has a dedicated logistics partner to handle shipping for UK/Europe, and late last year appointed a UK-based sales manager to look after the region.

Despite becoming more business-minded about exporting, McLachlan still finds some areas challenging. “The exchange rates have been our biggest nightmare. When we ask banks questions about foreign exchange, they just want to give us foreign exchange products, but it doesn’t help us understand what to use the products for. Because we’re a small business it isn’t like we can put on a foreign currency team.”

The high Australian dollar has also troubled itti bitti’s margins, she admits. “Because the exchange rate—especially in the UK and Europe where our biggest markets are—changed by 35 percent or something astronomical, it has made it difficult for us. We can’t just up the prices because then we price ourselves out of the market. We’re trying to get that balance between our margin and what the buyer can take.”

Online versus offline

Remember that website McLachlan made when itti bitti was just a hobby? Having a web presence enabled the business to develop a strong fanbase and customer base. Although itti bitti has about 50 stockists in Australia and a number of partners worldwide, “our website is probably the biggest outlet,” McLachlan says.

The exporter supports this channel through international websites for European wholesalers, as well as customers in New Zealand, Portugal (in Portuguese), the UK, and the USA in those countries’ currencies. The business also uses social media to spread the word, with a Facebook page each for its markets in Australia, New Zealand, the UK and the USA, Twitter presences in Australia and the USA, a blog for its New Zealand site and a YouTube channel that demonstrates how best to use the products. Collectively, this represents thousands of people interested in the brand and a powerful word-of-mouth network.

Online communication can be a double-edged sword, however. McLachlan says she’s more productive when she sees people face-to-face. “It sounds good to be able to email, but travel to the other side of the world and you sort out in half an hour what you’ve been trying to sort out in two months over email. Face-to-face is crucial.”

McLachlan also practises another form of ‘offline’ business: managing her work/life balance. “I’m lucky my ex-husband and I had an amicable split and he’s supportive of what I do so we’ve managed to juggle the kids between us. Because it is my own business, it allows me flexibility that I’d never get in a normal job, but I do work a lot of nights and weekends,” she adds. The exporter is also, unsurprisingly, highly supportive of staff who are working parents.

Happy nappy company

Last year, itti bitti was invited to enter the Newcastle Export Awards, a precursor to the NSW event. To McLachlan’s surprise, the business took home the regional award and the small business category at the Premier’s NSW Export Awards, becoming a national finalist in the process. “I didn’t even know there were awards,” McLachlan admits. “I thought ‘I’ll give it a go’ and then we won. It was such a buzz to see that my hobby business could win a NSW Export Award. I was so proud of everything I’ve done and everyone involved with itti bitti.”

In addition to rewarding the team, the award brought recognition and credibility to the itti bitti brand. It also exposed the concept of modern cloth nappies to a wider audience, says McLachlan, something they’re working on. “Cloth nappies are used in Europe but in Asia people don’t really get the concept because the industry is quite new there. We ended up making a DVD of instructions for our customers but also for the stockists to see how to use it.”

The education process paid off, with a fledgling Asian market on the rise. It’s something McLachlan relishes, seeing itti bitti take over the world. She recalls seeing photos a Japanese partner took of itti bitti products in various department stores. “I thought ‘oh my God, there’s a photo of my product in a department store in Ginza, Tokyo’. And in Japanese packaging and everything,” she enthuses. “It’s just fantastic knowing that there are people all over the world that want to buy something that I’ve designed. I still get really excited about it.”

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